Transmission Development


Published on

This webinar addresses the key industry trends impacting transmission development, FERC Order 1000 and the impacts of the removal of the right of first refusal for transmission developers.

Published in: Business, Technology
  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Transmission Development

  1. 1. Transmission Development – Key Issues to Watch Cristin Lyons, Partner October 17, 2013 Copyright © 2013 by ScottMadden, Inc. All rights reserved.
  2. 2. Introduction  Recent data suggest that spending on transmission infrastructure will be strong over the next decade. Anticipated investment for transmission projects scheduled to be completed by the end of 2023 is $74B  While the numbers suggest continued growth in transmission, there are various factors that will impact whether those projections come to fruition. Broadly, these trends can be placed into three categories:  Driving forces, including: – Changing generation mix – Aging infrastructure  Restraining forces, including: – Declining demand growth – Challenges to transmission ROEs  Complicating factors, including – Demand response and energy efficiency – Distributed generation – Electric and gas convergence 1 Copyright © 2013 by ScottMadden, Inc. All rights reserved.
  3. 3. Investments in U.S. Transmission, 2013–2023 Total In-Service Cost of U.S. Transmission Projects $13.2 $14 $12.5  According to recent SNL data, total in-service costs for transmission projects to be completed in the United States by 2023 are projected to be $74B $13.1 $12 $10 $ Billions $8 $8.8 $7.9 $6.3 $6.0 $6  These investments are projected to result in 39,100 new transmission line miles $4.3 $4 $1.5 $2 $0.1 $0.2 $0 Total In-Service Cost of U.S. Transmission Projects by NERC Region, 2013–2023 MRO $8B 7,760 mi WECC $30B 14,076 mi SPP $5B 2,346 mi TRE $5B 3,492 mi 2 Sources: SNL data; ScottMadden analysis Copyright © 2013 by ScottMadden, Inc. All rights reserved. RFC $13B 4,479 mi NPCC $7B 2,913 mi SERC $5B 3,469 mi FRCC $0B 565 mi  More than 28,000 of these line miles are scheduled to be in service by 2018  The amount of transmission planned varies significantly across the regions of the United States, as do the drivers of that investment
  4. 4. Changing Generation Mix Planned Coal Capacity Retirements, 2013–2022 Coal Retirements/Shift to Gas  Approximately 71 GW of fossil‐fired generation is projected to retire by 2022 (with more than 90% retiring by 2017) due to federal environmental regulations, low natural gas prices, and economics  Several ISO/RTOs have identified transmission projects and/or expenditures specifically related to the transition away from coal  In 2012, PJM authorized over $5B for more than 750 transmission improvement projects to ensure reliability as coal plants retire Renewable Portfolio Standard Policies (as of March 2013) Renewables Integration  State RPS and federal incentives remain important drivers of transmission development  In EEI’s annual Transmission Projects at a Glance, of $51.1B in planned investment, 76% or $38.6B are related to the integration of renewables 3 Sources: Platts; EE News; MISO EPA Impact Analysis; SNL Financial; Database of State Incentives for Renewables & Efficiency Copyright © 2013 by ScottMadden, Inc. All rights reserved.
  5. 5. Aging Infrastructure and System Hardening Top Ten Industry Issues Facing Utilities in 2013  Utilities are investing heavily to replace aging infrastructure and bolster existing infrastructure against the damaging effects of increasingly frequent extreme weather events More Important  In Black & Veatch’s 2012 report, aging infrastructure was the most important issue for respondents Less Important  In response to recent extreme weather events, utilities are investing in system hardening, and these investments are expected to be greatest in areas that have been hit particularly hard by recent events  Aging infrastructure will not be addressed in isolation. Asset management programs and Smart Grid implementations will be part of the investment to address both reliability and resiliency challenges 2011–2012 Extreme Events and Reported Customers Affected by Power Outages Event Date Region, Division, or State Customers Affected (in millions) Derecho July 2012 Middle Atlantic 4.2 Oct 2011 New England 3.0 Aug 2011 Middle Atlantic 3.2 Wildfires July 2012 California, Colorado 2.0 Windstorm Sources: Black & Veatch 2013 Electric Utility Report (Top Ten Issues Facing Utilities) 8.1 Tropical Storm Irene 4 Oct 2012 Northeast Early season snow Copyright © 2013 by ScottMadden, Inc. All rights reserved. Superstorm Sandy Nov 2011 Southern California 0.4
  6. 6. Declining Demand Growth U.S. Demand Growth, 1950–2040  The Energy Information Administration (EIA) projects growth in demand in the United States to remain below 1% for the foreseeable future  According to NERC’s 2012 Long-Term Reliability Assessment, demand growth for the summer season was at its lowest level since 1967 when NERC began reporting data Reasons for Transmission Project Delays or Deferrals  Reduced load-growth projections contribute to the postponement or cancellation of large transmission projects (i.e., MAPP and PATH in PJM)  The proliferation of DSM and EE initiatives, coupled with expanding customer-side supply alternatives, will likely suppress demand growth for the foreseeable future 5 Sources: EIA; NERC 2012 Long-Term Reliability Assessment Copyright © 2013 by ScottMadden, Inc. All rights reserved.
  7. 7. Challenges to ROEs  In November of 2012, FERC reaffirmed and clarified its commitment to incentives in transmission and provided guidelines under which these would be considered Outstanding FERC Complaints Current (Proposed) ROE Requested ROE Bangor Hydro-Electric, Central Maine Power, National Grid, NextEra, NSTAR, NE Utilities, CL&P, WMECO, PSC of NH, United Illuminating, Unitil, Vermont Transco 11.14% 9.20% Florida Power (Progress Energy Florida) 10.80% 9.02% Southwestern PSC 11.27% 9.65% Cleco Power 10.50% 8.55% PSC of Colorado 10.25% 9.15% Maine PSC 10.50% 8.83% Niagara Mohawk Power (National Grid) 11.50%2 9.49%2 Niagara Mohawk Power (NYISO) 11.50%2 9.25%2 11.14% 8.7% 10.8%3 11.3%4 8.7% Pacific Gas and Electric Company 11.5%2 9.1%1,2 Southern California Edison Company  In addition, scrutiny of ROEs has recently increased Utilities 12.6%5 11.03%1,5  Intervenors have filed numerous Section 206 complaints with FERC requesting that authorized ROEs be reduced because the current rates are unjust and unreasonable  Many intervenors believe transmission investment opportunities should reflect a “new normal” economy with lower interest rates and lower costs of capital. The Commission’s decisions are pending  We would expect this trend to continue as pressure on electric rates in general increases Bangor Hydro-Electric, Central Maine Power, National Grid, NextEra, NSTAR, NE Utilities, CL&P, WMECO, PSC of NH, United Illuminating, Unitil, Vermont Transco Baltimore Gas & Electric Company, Pepco Holdings, Delmarva Power & Light Company, Atlantic City Electric Company, Potomac Electric Power Company 1Complaint filed during utility-initiated rate case proceeding inclusive of 50bps adder 3Rate for projects before 2006 4Rate for projects after 2006 5Rate inclusive of 110bps adder 2Rate 6 Sources: EEI, “Transmission Investment: Adequate Returns and Regulatory Certainty Are Key” (June 2013); SNL; Moody’s “May the FERC be With You” (May 2013) Copyright © 2013 by ScottMadden, Inc. All rights reserved.
  8. 8. Complications… Performance Incentives for Electric Efficiency by State  Energy efficiency and demand response programs are reducing load and specifically peak load; more and more these are being relied upon as capacity resources  Distributed generation and other customer self-supply options are reducing utility loads and making them less predictable  These make planning and operating the transmission system more difficult Reported Potential Peak Reduction by ISOs and RTOs in 2010 and 2012 Source: IEE, State Electric Efficiency Regulatory Frameworks, 2012 Net Metered Capacity (MW) 82 (3%) 111 (4%) 382 (14%) Solar - Residential 1,022, (38%) Solar - Commercial Solar - Industrial 1,088 (41%) 7 Sources: FERC, Assessment of Demand Response & Advanced Metering, December 2012; EIA, GTM Research, ScottMadden analysis Copyright © 2013 by ScottMadden, Inc. All rights reserved. Wind Other
  9. 9. Driving, Restraining, and Complicating Factors The industry is in a unique position with certain factors favoring significant transmission development and others working against it. At a minimum, transmission planning, development, and operations will become even more complex in the years to come. Driving Forces Restraining Forces  Renewables integration  Economic malaise  Generation retirements  Declining demand growth  Shift to gas-fired generation  Uncertainty about ROEs  Aging infrastructure  Rate pressure  Siting and permitting Complicating Factors  Distributed generation  Demand response  Electric and gas convergence 8 Copyright © 2013 by ScottMadden, Inc. All rights reserved.
  10. 10. Cristin M. Lyons Partner ScottMadden, Inc. 2626 Glenwood Avenue Suite 480 Raleigh, NC 27608 O: 919-781-4191 M: 919-247-1031 9 Copyright © 2013 by ScottMadden, Inc. All rights reserved.